U.S. Data Center Market - Industry Outlook and Forecast 2020-2025

INDUSTY INSIGHTS

A few major criteria for the growth of data centers in the US are the availability of tax incentives, renewable energy sources, and reliable electricity supply. Tax incentives offered by local government agencies are factors encouraging service providers to establish new facilities in the US. Several state and local governments provide investment and sales tax incentives to attract operators. In the US, over 25 states are offering specific tax incentives for the building of new facilities, which include Virginia, Illinois, Ohio, North Carolina, Alabama, New York, Arizona, and Nebraska.  In 2019, Indiana, state legislators passed a law that exempts sales taxes on infrastructure and electricity costs for sizable data center construction. Such tax breaks can amount to the saving of $1.75−10.5 million for each qualifying Indiana-domiciled data center.  Hence, the availability of several tax incentives from regulatory agencies has been the major driver for hyperscale data center growth in the US.

SNIPPETS  

• The outbreak of COVID-19 virus has altered the data centers construction in the US, where the opening of several new facilities is likely to be delayed by up to three months.
• The server market will continue growing during the forecast period with the increased investment in the digitalization of business operations and the development of hyperscale and colocation facilities in the US region.
• All-flash and hybrid storage arrays will dominate the storage market, thereby contributing the U.S. data center market growth.
• The market will witness the rise in multiple brownfield constructions, especially in North Eastern US
• The South Eastern region is likely to dominate the U.S. data center market 
• The government’s inclination to promote data center development through land availability, reduced electricity tariffs, and the procurement of renewable energy resources will drive the U.S. data center market growth during the forecast period

U.S. DATA CENTER MARKET SEGMENTATION

This research report includes a detailed segmentation by IT infrastructure, electrical infrastructure, mechanical infrastructure, general construction, tier standards, and geography.

INSIGHTS BY IT INFRASTRUCTURE

The procurement of ODM servers by hyperscale operators, cloud builders, and other enterprises has offered a significant boost to the server market. Server systems based on x86 architecture dominate the U.S. data center market shares. Most modern operators are adopting servers that suit their workload requirements. The demand for servers suitable for the cloud environment will continue to grow during the forecast as service providers expand their presence in the US. Servers with multicore processors and memory are expected to grow as the average number of virtual machines per physical servers continue to grow.

INSIGHTS BY ELECTRICAL INFRASTRUCTURE

The adoption of modular, scalable, and lithium-ion powered systems in the facilities is expected an increment in revenue from the UPS systems segment. Several hyperscale facilities are built to support a critical power capacity of over 15 MW, which is expected to boost the data center power infrastructure procurement. Several facilities are equipped with dedicated UPS systems with a minimum of N+1 power redundancy and flexible design support 2N+1 redundant system installation. The adoption of intelligent rack PDUs supporting up to 20 kW will increase with the use of high-performance computing infrastructure in the US. Diesel generators are more likely to be adopted than any other generators such as biofuel or natural gas.

INSIGHTS BY MECHANICAL INFRASTRUCTURE   

Southeastern, Northeastern, Mid-Western, and some parts of Western US states support free-cooling techniques, which reduce the electricity cost by up to 30%. In other states, the operators adopt free-cooling techniques that include chillers with evaporate cooling. Leading data center development destinations such as Virginia supports up to 5,500 hours of passive free cooling methods annually, thereby reducing the adoption of chillers. Alabama and Florida support around 3,500 hours and 3,000 hours of free cooling methods, respectively. In South-Western, Texas supports up to 3,500 hours of passive free cooling methods annually, thereby reducing the use of chillers. Arizona and New Mexico, on the other side, support around 3,500 hours of free cooling methods. Several facilities in the US South Western region that utilize air-cooling chillers and CRAC units.

INSIGHTS BY GENERAL CONSTRUCTION

Ashburn has become a major data center development location. DPR Construction and Jacobs Engineering Group contractor are among the major players in providing construction services in the South Eastern region. The facilities are expected to commit the 100% uptime service level agreement on network and power along with Tier III and IV standards. Several facilities can efficiently manage power, temperature, and environmental conditions via data center monitoring solutions.

Arizona and Texas in South Western have become major data center locations. The monitoring solutions enable facilities to manage power, temperature, and environmental conditions. Several facilities in Mid-Western are constructed with multi-level security cover and equipped with perimeter fencing, anti-intrusion system, dual authentication entry, biometric and color-coded key card security, and interior and exterior video surveillance. There is a growing demand for IP video surveillance systems in the U.S. data center market.

INSIGHTS BY TIER STANDARDS

Small-scale colocation facilities are likely to operate with redundancy in UPS systems and PDU devices.  A majority of underdeveloped projects in the US fall under the Tier III category. This trend is likely to continue during the forecast period, with several operators expected to shift to the Tier IV category based on the growth in rack power density and critical applications. Most new facilities are designed to be Tier III standards with a minimum of N+1 redundancy and can be reconfigured with up to 2N+1 redundancy. In 2019, over 50 new facilities were opened in the US, which were Tier III designed. Tier IV data centers are equipped with 2N+1 redundancy in the infrastructure that makes the facility fault-tolerant, with UPS systems and PDUs having 2N+2 redundancy.  

INSIGHTS BY GEOGRAPHY

Data centers in the South Eastern US are significantly contributing to the market. Overall, the Southeast U.S. data center market witnessed around 50 projects in 2019, which is expected to be operational by June 2020. Several facilities have been developed by colocation service providers with an adaptable power redundancy that can be changed according to the customer's operational requirements.  In 2019, the Virginia market witnessed an investment of over $1 billion with the opening of several projects in the region.

Facebook and Apple are investing over $1 billion in Ohio, Nebraska, and Iowa in the hyperscale market. Illinois market is witnessing an investment of around $1 billion, followed by Ohio with over $700 million between 2019 and June 2020. In terms of tax incentives, Illinois passed a tax incentive as part of the state’s $45 billion capital construction budget that exempts qualifying data centers from state and local sales tax on the equipment inside the facilities for the next 10 years.

KEY VENDOR ANALYSIS

Cummins and Caterpillar have a strong presence in the U.S. data center market. The adoption of lithium-ion batteries, fuel cell technology, natural gas generators, intelligent PDUs, and high-voltage switchgears is expected to grow significantly during the forecast period. Mechanical infrastructure comprises multiple systems that provide sufficient cooling solutions for growing rack power density. The market will witness a high competition in the US as the construction of the data center is growing, and the operators are constantly looking out for energy-efficient cooling systems with low carbon emissions. Vendors are also partnering with modular facility developers and direct liquid cooling providers to increase their revenue, and the trend is likely to continue during the forecast period.

The U.S. data center market research report includes in-depth coverage of the industry analysis with revenue and forecast insights for the following segments:

By IT Infrastructure 

• Servers
• Storage
• Network

By Electrical Infrastructure 

• UPS Systems
• Generators
• Transfer Switches and Switchgears
• Rack PDU
• Other Electrical Infrastructures

By Mechanical Infrastructure

• Cooling Systems
• CRAC & CRAH units
• Chiller Units
• Cooling Towers, Dry Coolers, & Condensers
• Other Cooling Units
• Racks
• Others Mechanical Infrastructure

By General Infrastructure   

• Building Development
• Installation and Commissioning Services
• Building Designs
• Physical Security
• DCIM & BMS

By Tier Standards 

• Tier I &II
• Tier III
• Tier IV

By Geography

• North Eastern US
• South Eastern US
• Mid-Western US
• South Western US
• Western US